FAQ's

What type of loan is right for me, an installment equity loan or equity line?

The answer to this question is determined by what you are looking to accomplish with the loan. Below is a brief explanation of both types of loans.

An installment mortgage typically has a fixed interest rate and is paid in full over a predetermined time period. This term can range from 5 years to 30 years. The less time you take to pay the loan off the less interest you pay back to the lender, but bear in mind the payment will be higher if you elect to take a shorter term. Many people elect this type of loan if they want to retire debts or complete a home improvement project and don't anticipate needing access to funds again.

An equity line is a mortgage that carries a variable rate of interest that is tied to an index such as the prime rate. Usually the variable rate is the index rate plus 1% - 4%. The main advantage of this type of loan is its open-end feature. This means if you pay this type of loan down, you can always access up to the maximum line amount without having to reapply for a new mortgage. Think of it as a visa card with a good interest rate but carries the tax deduction of a home equity loan.

What determines my interest rate on my loan?

Lenders take three main criteria into consideration when pricing a loan. These criteria are commonly referred to as the three C'-s of credit.

First your capacity is measured. This is your ability to repay the debt. The higher your debt to income ratio, the lower your capacity and the higher the rate will be.

Second is your character, or your willingness to repay debt. Your attitude toward repayment is reflected in your credit report score. The majority of lenders use your credit score in figuring your interest rate. A credit score, often referred to as a FICO score, can range from 400 to over 800. The better your credit history, the higher your score. Other things that help bring your score up include low levels of debt, long-time credit history and an on-time repayment history to your creditors. Your score will be lowered by unpaid collection accounts, slow pay history, and public record items such as judgements against you, prior bankruptcies and foreclosures.

Finally comes the collateral. This is the value of the home being used to secure the loan. The lower the loan amount in comparison to the value of the home, the lower the perceived risk and therefore the lower the rate will be.

Let us know how we can help you with your home loan.

We're listening !